Members of Congress criticized the decision to allow the CEOs of the bailed-out companies Fannie Mae and Freddie Mac to receive salaries of $4 million annually, suggesting that it represented that the businesses were returning to the old business model that led to their collapse and taxpayer bailout.
"This decision by the Federal Housing Finance Agency to dramatically boost the salaries for the CEOs of Fannie and Freddie would appear to signal a return to business as usual," said Sen. Mark Warner, D-Va., in a statement on the agency's decision announced Wednesday to allow the two CEOs to get raises from the $600,000 annual salaries they had been earning earlier.
Warner is one of the original Senate authors of legislation to shut down the two companies and replace them with a new housing finance system in which private investors would be first in line for losses on mortgage-backed securities. That legislation cleared the Banking Committee, but failed to go further in the chamber.
Lack of congressional action has left major decisions about the two government-sponsored enterprises up to their government caretaker, Federal Housing Finance Agency Director Mel Watt.
Watt said Wednesday that allowing the raises was necessary to retain executive talent at the massive businesses.
Sen. Bob Corker, R-Tenn., Warner's co-author on the reform legislation, said that "because it appears that FHFA is ready to unilaterally drive the GSEs back to the failed model of private gains and public losses, this decision is just one more reason Congress must act to reform our housing finance system."
Rep. Scott Garrett, R-N.J., the conservative chairman of the House subcommittee responsible for oversight of Fannie and Freddie, criticized Watt for "handsomely rewarding the executives of these failed institutions."
"Today's announcement is yet another reminder that Washington cronyism is alive and well," Garrett said.
On Twitter, Rep. Ed Royce, R-Calif., called the decision "absolutely egregious." Royce introduced legislation capping the two CEOs' pay in May when Watt asked for proposals for compensation plans from the companies.